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Sir Richard Luce (Shoreham) : I am glad to follow the hon. Member for Berwick-upon-Tweed (Mr. Beith), who is a long-standing member of the Treasury and Civil Service Select Committee, of which I am the newest member. I am glad also that he devoted much of his speech to Labour's failure to meet the effective challenge made by my right hon. and learned Friend the Chief Secretary in what was not only a colourful and entertaining but an effective speech, in which he exposed the growing contrast that the public perceive between the Government's economic policies and those of the Labour party. It is very much in my personal vested interest to maintain a good relationship with the hon. Member for Derby, South (Mrs. Beckett), so I should not want to say anything that might upset her. However, she utterly failed to meet the challenge by my right hon. and learned Friend the Chief Secretary when he referred to the various confusing statements made not only over the past few days but for weeks by the Leader of the Opposition, the hon. Member for Derby, South and a variety of shadow Cabinet members, in making high-priority public commitments in respect of their specific areas of responsibility. I hope that, when the hon. Member for Newcastle upon Tyne, East (Mr. Brown) replies, he will make an effective answer to my right hon. and learned Friend the Chief Secretary.
Day by day, the Labour is coming out in its true colours, as the party of high spending and high taxation. Its pursuance of those policies when in office in the 1960s and 1970s was one of the main reasons why this country subsequently found itself in such profound economic difficulties. It is important that not only Parliament but the country should draw its own conclusions, and distinguish between party policies.
There is no getting away from the fact that the hon. Member for Derby, South made a commitment that under Labour, there would be an early increase in pensions and child benefit, and that further commitments would play their part later. Other shadow Ministers have also made plain their own priorities. The first priority of the hon. Member for Copeland (Dr. Cunningham) is education ; of the right hon. and learned Member for Monklands, East (Mr. Smith), education and training ; and of the hon. Member for Cynon Valley (Mrs. Clwyd), dramatic
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increases in overseas aid. The right hon. and learned Member for Monklands, East has also identified renewed growth in manufacturing investment as a key priority.The hon. Member for Berwick-upon-Tweed (Mr. Beith) rightly drew attention to Labour's apparent commitment to renationalising the water industry, and to not proceeding with the Government's policy of privatisation if they achieved office in the next five years. Neither was taken into account in Labour's calculations.
Let us compare the Conservative Government's 12 years in office with the Labour Administration of the 1970s. Putting aside the present downturn in the economic cycle, it is clear that, under the present Government, there has been sustained economic growth, and record investment--which is important for the country's future. Over a period of time, there has also been a reduction in direct taxation, and public expenditure has taken a declining share of gross domestic product.
Although my party is sometimes a prisoner of its own rhetoric, there have also been substantial increases in carefully selected areas of public expenditure. In 1979, 1983, and thereafter, we gave the highest priority to turning the economy around, reducing the proportion of expenditure taken up by central Government, encouraging and proceeding with privatisation, and promoting greater competition within the economy. It was perfectly right to do that, but the public's perception is that we have paid no attention to other sectors of the public services. That is simply not true.
As was said by my right hon. and learned Friend the Chief Secretary, health and education expenditure as a proportion of GDP has increased from 4.5 per cent. in 1979 to more than 5 per cent. Expenditure on law and order has doubled in real terms. In the arts--the sector that I once served as a Minister--there has been an increase of more than 50 per cent. in real terms in expenditure on libraries. My right hon. and learned Friend also described the dramatic real increases in spending on roads and the infrastructure. So we are in a sense prisoners of our own rhetoric, and it is important to get the right perspective.
The hon. Member for Norwich, South (Mr. Garrett) devoted much of his speech on describing how one can best scrutinise public expenditure and challenge Government targets and performance, and he was right to do so. However, that debate is not one which matters very much. The focus has been too much on the quantity of money put into the public services, and not enough on improving their quality using a given sum of money. Labour says that the answer is to throw more money at the public services, but we should be equally concerned with improving their quality.
The Government's recent reforms and their establishment of executive agencies have resulted in discrete and clear-cut services. Targets are set for them, annual reports have to be made, and their performance can be judged by the House and by its Select Committees. That is a remarkably significant and important reform. I was glad that the right hon. and learned Member for Monklands, East said in a recent speech that Labour supports that development. It is important that it should do so. However, Labour spends little time suggesting ways in which the overall quality of public services, such as health or education, could be improved. Rather, Labour says that one should simply throw money at those services to solve their problems--which is quite wrong.
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We must not underestimate the importance of the changes that are occurring in the civil service. By next year, 285,000 civil servants will be working within executive agencies in which their work, targets and performance can be properly scrutinised. For those agencies to be effective, they must enjoy the maximum degree of decentralisation and the greatest possible delegation of authority. The Treasury and the parent Departments must allow them to get on with the job and to carry on with their operations as effectively as possible, within the resources agreed. I was concerned by the results of a survey published by Price Waterhouse in March, which indicated that there is a feeling among those working in the agencies that there is still too much interference by Government Departments in their management. I hope that, when my hon. Friend the Financial Secretary replies to the debate, he will assure me that it is Government policy to delegate authority fully and properly within given resources.Given public demand, there will never be sufficient resources from the taxpayer for public services. There will always be pressure for more resources for health, education and roads. It is the duty of any Government to try to create a climate in which resources can be raised by the private sector and by other means to supplement the support of the taxpayer. In the past 12 years, private sector resources to charitable bodies have doubled in real terms, which is a great achievement. The Government should always be looking for new ways of raising extra resources to enable the public to play a fuller part in helping to pay for services for which, in the foreseeable future, it is less likely that the Government will be able to give much taxpayers' support.
I welcomed the announcement that my right hon. Friend the Chancellor made in the Budget to increase the overall sum given to the Football Trust for sport and the arts. It is odd that part of the money given to the Football Trust should go to the arts, but I hope that that new venture will succeed. By making available about £60 million a year for sports and the arts, I hope that it will prove to be another way of adding extra resources for sectors that will otherwise receive little support from the taxpayer.
That must not be seen as a substitute for a national lottery, which I should like to see introduced in the 1990s. In Europe, £12 billion is spent on lotteries. Ireland recently introduced a lottery, which makes available about £500 million for expenditure on the environment, sport and the arts. We should establish an independently run lottery system that allows for capital expenditure on improving sports facilities and on refurbishing theatres for the fabric of the nation, and for endowment funding of sport, the arts and the environment. We must make it clear that a lottery would not be a substitute for the Football Trust as it would operate on a larger scale and would raise much larger sums. I hope that, when my hon. Friend the Minister replies, she will be able to offer some encouragement for the introduction of a national lottery in the near future.
I believe that the Government are on the right course for the management of the economy. We must stick firmly to reducing inflation and to returning to the successful period of sustained growth that we achieved in the 1980s.
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7.13 pmMr. Thomas Graham (Renfrew, West and Inverclyde) : When the Tories were fighting the general election, I remember seeing all over the country a big Saatchi and Saatchi poster that said, "Labour isn't working". It showed a queue of people, which represented 1 million unemployed people. Today, more than 2 million are unemployed. What have the Government done to get this country back to work? Public expenditure is a dirty word to Tories. They have sold off the country's assets, and their privatisation policy has robbed the ordinary men and women who worked hard to make this country rich. The Government seem to go about like pirates, ripping off and selling off businesses that were owned by the country. I always thought that public expenditure was used for the good of the country--to improve the quality of life, to ensure that our elderly people receive decent pensions, that our children received a decent education and that our workers worked in decent, comfortable surroundings while producing the goods that make the country viable.
The Government's obsession with the public sector has driven them to do exceptionally mad things. It does not matter who they hurt in their quest to dismantle the public sector. It does not matter whether elderly people are living in poverty. The Government have no compassion, and I shall give the House some examples of that later. Privatisation, instead of increasing jobs, invariably led to more job losses, higher prices and to the workers who make a company strong, healthy and attractive to buy being thrown on the scrap heap. People in the City, and the asset strippers, made more and more money.
The price of food and phone charges have rocketed. The price of gas and electricity, which are essential to the quality of life of people on low incomes, has increased. The Government, the engine of free enterprise, should be renamed the "engine of the free giveaway to their friends". They have concentrated on stripping and dismantling industries to ensure their power base, with their people having the money and controlling each of us. The sale of the royal ordnance factories was a classic example of a company that was worth billions of pounds being given away for £140 million. The sale of the Rover Group was a pathetic disgrace. The gas and water industries were given away and the electricity industry is to be hived off to the Tories' friends.
The classic error of the Government is their blatant attack on local government.
Mr. Tony Marlow (Northampton, North) : Will the hon. Gentleman give way?
Mr. Graham : I am not prepared to give way at this stage. The Government's hatred of local government led to their decimation at the recent local elections.
Mr. Marlow rose --
Mr. Graham : Earlier, Tory Members were baying like dogs when my hon. Friend the Member for Derby, South (Mrs. Beckett) was trying to speak. I come from a hard school. If the hon. Gentleman continues to try to butt in, I will not give way. I will give way when I am ready.
The Government's underfunding of local government has been one of their most tragic errors. Their underfunding of the national health service has cost them
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by-election after by-election. The underfunding of local enterprise companies is incredible, as they say that they want to see healthy, trained and educated young people.What have public expenditure cuts in the national health service meant in Renfrewshire? Waiting lists are growing daily. Thousands upon thousands of people are desperate for not only operations but consultations to find out what is the matter with their health. Recently a friend of mine was suffering from a terrible pain. It took all kinds of meetings before it was discovered that he had a spot on his lung. [Interruption.] I see the hon. Member for Northampton, North laughing. It is no laughing matter. If he had any spots on his lungs and it took weeks on end to get an X-ray and an appointment with the consultant, he would not find it a laughing matter.
Mr. Marlow : Will the hon. Gentleman give way?
Mr. Graham : No, I wish to continue.
In local government we see that schools are falling down. In my area there are some very good schools, but others desperately need public expenditure. They need more money to make the schools better and a fit place for the children. In some schools rain comes in through the roof and the windows are not watertight or windproof. Local government is striving with its limited money to provide a service.
Crime is raging throughout Britain. Since the Government came to office we have seen a horrific escalation of crime. There has been an escalation in drug taking. The Government peddle the idea that they are prepared to put more money into dealing with drugs, yet they do not provide more task force police to tackle drug abuse in our communities. I shall come back to that because I believe that public expenditure should be directed to problems which cause tremendous anxiety. In my constituency the police take so much time trying to prevent drug taking and catch drug pushers and dealers that other crimes such as burglary, car theft and crimes which feed the drug industry are rocketing. The police need more resources, yet the Government hide behind their hatred for local government and do not direct the resources necessary to allow our police to do an effective job.
I remind the House of the consequences of cutting the number of home helps. The numbers have been cut because of the disastrous poll tax which has forced people to look more closely at budgets. The budget for services such as home helps has been cut. It makes me sick. In Strathclyde, as a result of the expenditure cuts and the lack of money for local councils, we are considering the possibility of cutting fares for the elderly.
We have terrible problems of pollution. The Government should spend enough money to bring the water up to EC drinking standards. Our beaches are the worst in Europe. It is right for the people in the environmental world to call us the dirty old man of Europe. That is not something of which I am proud. It is a terrible day when one cannot walk along the promenade at Blackpool because one is frightened to get a whiff of the pollution, which could cause gastro-enteritis or some other illness. The Government should face up to their responsibilities and ensure that there is enough money to cope with the damage being done to Britain.
Our infrastructure is falling down. If one walks about with one's eyes closed one will bump up against walls
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which should have been fixed and replaced. For example, in my constituency there is a quarry with a road alongside which has a wall running beside it. The wall is always being broken down for many reasons. The local authority does not have the money to repair it. But the wall must be repaired so the local authority will repair it. But everything takes time because the Government keep savagely cutting and cutting.Recently in Scotland we had the launch of the local enterprise companies. My goodness, what a fiasco. The Minister walked about with a big smile and the television cameras came along. The LECs were supposed to regenerate local employment prospects. They were supposed to ensure that local kids would be re-educated and retrained to meet the new Europe of the 1990s. That was what it was all supposed to be about. But it means a 32 per cent. cut in the budget compared with the year before. In factual terms it means that 7,000 young people will not receive training. Adult training schemes will be cut by 17, 000 places.
A young man of 18 wrote a letter to me. The letter would bring tears to the eyes of any parent. It should bring tears to the Government. The young man was studying on one of the training programmes to be a plumber. We need plumbers. That young boy was thoroughly enjoying his plumbing training. He was on day release to a college. Incidentally, he was working not for a wage but for the buttons that the Government put up for these kids. Nevertheless, the young man was doing the training because he saw a possibility of becoming a plumber and getting into the big world, possibly down here to the south-east to build houses. Perhaps he could get a job fitting pipes for the moneyed folk who can afford central heating. But that young boy's job was terminated because the Government gave insufficient money to launch the local enterprise company and allow the young people in training to finish their courses.
The training places of thousands of people have been cut. We must not forget the men and women who were training these young people to equip them and give them some chance to earn a living. I live in Scotland, where over 200,000 people are unemployed. The Government have fiddled the figures 28 times to bring the total down to 200,000. But I shall not quarrel with them. I simply remind them that unemployment is a scourge. If it came to their families, they would know what that scourge means. It means that families on low wages cannot afford holidays. I use the word holiday lightly. Many such families cannot afford to eat properly, look after themselves properly or heat their houses in the winter. Yet the children continue to strive to obtain training against all the obstacles that the Government put in their way.
The young man to whom I referred is called Pat Campbell. He lives in Linwood. I shall come back to Linwood later. I have pleaded with Scottish Office Ministers to fund training at the same level as the previous year, with an increase for inflation, to ensure that the kids can finish their training. That would be to show compassion. Surely the Government should use their hearts for that. Surely those young people have a God-given right to finish their training. Surely young Pat Campbell could become a plumber instead of being cut off in the prime of his life. By goodness, he is no academic. He is just someone who makes Britain what it is well worth living for--a working-class young boy. Pat Campbell has been dumped.
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I received a letter from an elderly, disabled woman who relies on an electric wheelchair. When I hear the Government saying how well funded the national health service is, it makes me sick. That woman cannot even go to the toilet without the help of her electric wheelchair ; indeed, she can go nowhere without it. She wrote to tell me that her wheelchair broke down. It did not automatically stop but took the woman around in circles, which terrified her. However, someone managed to rescue her and take her home. When she contacted the health service to repair her wheelchair, and explained that it was essential for her to get to the toilet, the bedroom and the kitchen, she was given no priority.When I heard the Minister tonight, I felt that he was like a mugger robbing the old men and women to whom I refer, because that women had to wait five days before someone came from the health service to fix her wheelchair. The job took five minutes. She waited five days for a five-minute job, during which time her whole life was turned topsy-turvy. The health service is facing cuts, expenditure squeezing and all that crap which ensures that the quality of life for my elderly, disabled constituent has been put in jeopardy. No one can state that the health service is not under threat.
This week is the anniversary of an event that hurts me--the closure of the car plant in Linwood. Some folk may not be familiar with that town, but I live up there. The town developed because of the car factory, which employed 9,500 men and women but closed 10 years ago, practically to the week. Where are those 9,500 workers now? Droves upon droves of them have never worked since the factory closed. Many are now dead and buried because they contracted illnesses through the savagery and imposition of unemployment and the fact that they were no longer able to work for a living and provide for their families. Those conditions destroy health, and I had many friends who were affected in that way.
Ten years on, the Government have done nothing to introduce an alternative industry in Renfrewshire. If it were not for the local Labour-controlled council's efforts to attract industry, nothing would have been done. The way in which it goes about it must be punishing to body and soul. It is led by a fine young fireman, Owen Taylor. I do not say that he is a splendid young man simply because he is a Labour councillor. He looks at every opportunty to attract industry and jobs to the area. This week, he said to me, "Tommy, what are we going to do about the anniversary of the plant closure?" I see that the hon. Member for Wolverhampton, South-West (Mr. Budgen) is smiling. You should come to my constituency and you will not smile at the tenacity and will power of the people there. The people there will shake hands with you and probably buy you a pint, because I doubt whether you would buy them one. They, at least, have some compassion.
Madam Deputy Speaker (Miss Betty Boothroyd) : Order. The hon. Gentleman must speak through the Chair.
Mr. Graham : I apologise, Madam Deputy Speaker.
The closure of the factory and the loss of 9,500 jobs has caused difficulties in the community because we could never replace that many jobs. However, I am impressed by the tenacity of the local people, who hope that some day their young people will have the chance to go down the
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road to work and that the young men will come home with pay and the old men will retire gracefully having earned at least some wages. That would be an honest and realisable dream if the Government were committed to stopping the 2 million unemployment figure from rising continually. But the Government have a mad obsession with reducing inflation. They do not care about people but keep inflation down at the expense of the dole queue.My hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman) and I have another serious problem at the other end of my constituency in Inverclyde, where one of the finest marine engine building companies in the world is facing takeover. My hon. Friend has been fighting to keep that industry alive not only in Scotland but in this country and to protect the jobs of a fine collection of superb quality engineers, who made Scotland renowned throughout the world. He has challenged the Government to say something sensible about keeping that engine company going because to allow it to be taken over is ludicrous.
Dr. Norman A. Godman (Greenock and Port Glasgow) : I am grateful to my hon. Friend for his remarks about the campaign in which we are engaged to retain the last marine diesel engine builder of its kind in the United Kingdom. The takeover of that company by Kvaerner Industries of Norway is particularly disgraceful and squalid because of the decision to remove from employment 12 young apprentices. As one who served an apprenticeship in a shipyard, I believe that the last people to be dismissed from a firm when it hits hard times should be the apprentices. Surely the Minister will agree that, with indentured apprenticeships, management has a moral obligation to ensure that such young lads are encouraged and enabled to complete their apprenticeships. The decision in Greenock is a disgrace. I am glad to say that my hon. Friend and I will continue to fight against such squalid managerial decision-making--the first of its kind that I have encountered in the United Kingdom shipbuilding industry.
Mr. Graham : I am grateful to my hon. Friend for that telling intervention. It was helpful to express the problems imposed by a Government who are reluctant to save this country's manufacturing capacity.
The Inverclyde area has seen a rapid decline of a once great industry-- shipbuilding. The Government seem to forget that we are an island and our marine capacity is being stripped. All kinds of foreign competitors--
Mr. Marlow : On a point of order, Madam Deputy Speaker. Would it be possible for you, Madam Deputy Speaker, to rescue the House from the hon. Gentleman, who has been boring us for 25 minutes with his personal reminiscences, some of which have little to do with public expenditure?
Madam Deputy Speaker : I have been carefully reading the Opposition amendment and it seems that the hon. Member for Renfrew, West and Inverclyde (Mr. Graham) is within the terms of the amendment.
Mr. Graham : I am grateful to you, Madam Deputy Speaker, for rescuing me from one of the most boring and tedious Members in the House.
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Training is of vital importance. We would hope that our skilled engineers and experts who make the whole country work well--not just in London and the City could compete with their counterparts in the rest of the world. In order to buy bread for food, we need workers to produce goods. If we shut down manufacturing industry, we shall have nothing to sell. We cannot sell a £1 note--somebody must produce goods to sell to make the £1 note.Public expenditure in my district sometimes gives me terrible worries. We have seen the rapid decline of all the factories in my region and the introduction of the Government's enterprise zone. I shall not mock the enterprise zone--I wish it success. Unfortunately, it is not a success because there is insufficient money to get it going properly. We have asked the Minister to spend money so that we can get the enterprise zone going and possibly get some work into the district, but our campaign seems to fall on deaf ears. Many local people work voluntarily to try to bring employment into the district, but if they do not receive the necessary finance from the Government, they will not be able to achieve anything.
Lack of public expenditure in Scotland has caused massive housing problems. We have damp housing which is unfit to live in. The council does not have sufficient money to bring council houses up to the proper standard. Homelessness has escalated because there is insufficient money to deal with the problem. We need new homes that people can afford to buy and rent. We need jobs. We need to attack poverty and we need money to buy goods, which are not free. If someone takes shop goods for nothing, he will end up at the police station. Poverty will be eliminated only if the Government spend money, and they must realise that.
I recently finalised a promise that I had made to my 13-year-old son. Some time ago he was in hospital for a while and I promised that I would buy him a bike as soon as he was fit to ride in the fresh air. I took my son over to the bike shop and got a shock to find that bikes cost £200 and more. I thought about a former Minister's nutcase statement--"Get on your bike" in search of a job--and wondered if he realised that a bike costs £200 or even £500. I nearly fell off my bike when I found out. I bought my son's bike with pleasure, but I thought about the many young people from families on low incomes. When I was a young boy, my family was on a low income, but I had a bike and could get about. If young people today are on low wages, what do they do? They can no longer have the pleasure of a bike if it costs £200.
In Scotland, literally thousands of our men and women, and their families, leave our shores in search of work. We hear stories from Australia, New Zealand and America about how well those people are doing. They would love to come home and ask whether there will be any jobs for them if they do and whether we have got rid of this Government yet. We will get rid of them. There are literally thousands of Scots men and women who wish to come home. I wish to see them come home, and I believe that the only way to get them home is to get rid of the Tory Government. I am determined to see Scottish men, women, sons and daughters come home, enjoy our country and live a decent quality of life under a Government who care. I believe that a Labour Government would offer that.
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7.46 pmMr. Quentin Davies (Stamford and Spalding) : We were given a revealing performance by the hon. Member for Derby, South (Mrs. Beckett), the shadow Chief Secretary. She was evasive and declined to take interventions. She was even more obviously evasive in the way that she declined to answer the questions that Conservative Members were able to put to her during her speech. She was markedly indecisive and apparently entirely unable or unwilling either to establish an order of priority in her policies or to set the so-called list of Labour party priorities--which has now become a list of a myriad of objectives--in order of relative importance. My right hon. and learned Friend the Chief Secretary was absolutely right to remind her of Aneurin Bevan's well-known phrase about the language of socialism being the language of priorities. The hon. Member for Derby, South certainly traduced that language and abandoned that Labour party tradition this afternoon.
While on the subject of language, I think that it is more than disingenuous to distinguish between an increase in taxation and an increase in employee national insurance contributions, when one plans to remove the ceiling on employee national insurance contributions, while not removing the ceiling on benefits. The last link between contributions and benefits would be abolished under the Labour party's present plans, and the last vestige of the Beveridge--
Mr. Nicholas Brown : Will the hon. Gentleman give way?
Mr. Davies : I shall give way when I have completed my sentence, because that may allow the hon. Gentleman to make a more meaningful intervention.
The last vestige of the traditional Beveridge system, the link between contributions and benefits--the concept of national or social insurance-- would effectively be destroyed by what the Labour party proposes. We would end up with increases in taxation. Let us call a spade a spade : the Labour party is proposing an increase in income tax--nothing more, nothing less.
Mr. Brown : If the hon. Gentleman is so convinced of the intellectual validity and respectability of his point, why did he not make it to the Government when they removed the ceiling on employers' national insurance contributions?
Mr. Davies : As I always endeavour to do when speaking in the Chamber, I used my words advisedly. I said that the Labour party would remove the last vestiges ; I did not imply that the Beveridge system still exists in its original integrity--of course it does not, and some of us may regret that more than others. I do not know that the Labour party has fully taken on board the purport of what was proposed this afternoon by the hon. Member for Derby, South and what has recently been proposed by other Labour party economic spokesmen and women.
It was striking that the hon. Member for Derby, South displayed no clear understanding of the role of public expenditure in economic management. I have always believed that there are three respectable approaches to public expenditure management. One is the doctrine to which hon. Members on both sides of this House were devoted throughout the 19th and early 20th centuries--that public expenditure should be balanced in the same
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year by public revenues. That is the doctrine of the balanced Budget. It was dear not only to people in this country but to people throughout the western world, including those in the United States until the new deal.There is no doubt that the disciplines of that doctrine had a positive effect. Under its influence, the western world underwent its initial great industrial transformation. Nevertheless, that was also a period of sharp fluctuations in the economy, and of deep recessions and slumps. There is no question but that the doctrine of the balanced budget contributed materially to those sharp fluctuations and to the depths of the slumps and recessions. In a recession, when incomes fall, naturally Government revenues fall too, as the tax take from the economy falls. If Governments respond to that by reducing their expenditure, demand is further reduced in the economy, and the slump will be deeper.
Over the past 50 or 60 years, the view has been taken that the doctrine of the strict, balanced Budget can be economically damaging when pedantically applied. There was a time, from the 1930s to the 1960s, when a new doctrine, a new orthodoxy, emerged : that it was the responsibility of Government to adopt proactive and counter-cyclical policies. When there was a recession they were to increase their spending deliberately, borrowing so as to be able to do so. When times improved and the economy boomed, and incomes and therefore tax revenues began to rise again, Governments would reduce expenditure and use some of the balance of that revenue to repay the borrowing.
This was the classic Keynesian doctrine of deficit spending. We have learnt that that doctrine was not very effective in achieving its objectives, either. It, too has been shown to be essentially not a counter-cyclical or anti-cyclical policy but a pro-cyclical policy. Instead of increasing stability, it tends to increase the volatility of an economy. Instead of reducing the depth of recessions and the extent of inflationary booms, this doctrine tends to exacerbate them.
The reason for that is simple. Unfortunately, it is not possible for any man or woman consistently to second-guess the economy, any more than it is possible for anyone consistently to second-guess the individual markets that make up an economy, or for any mortal consistently and correctly to predict the weather.
As a result, by the time a Government have decided that recessionary conditions have arisen and it is appropriate to start deficit spending, the turn in the economy may well already have taken place, so that, when the spending comes through, instead of mitigating the recession it makes the boom more inflationary. That is especially true of investment spending, because of the long lead time between the decision to engage in it, the identification of the right objects of the expenditure, and the increase in demand which it brings about.
There are at least two other problems with Keynesian deficit spending, as our experience since the second world war has shown. First, it is in the nature of Governments--I fear that perhaps it is in human nature--that the increase in spending in a recession will always be much greater than the reduction in spending in a boom. The net effect of such intervention is therefore inflationary. We have, of course, suffered considerably from that over the past 20 or 30 years. The second factor is that, if it is known that Governments intervene deliberately and proactively in that way, agents in the economy will anticipate such
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action and discount it. The theory of rational expectations has taught us a lot about that, so we have become wiser in that respect, too.I believe that the right policy is the third policy, which has been explicitly adopted by my right hon. Friend the Chancellor of the Exchequer. It is not to adopt a proactive, counter-cyclical, or a proactive, pro- cyclical policy on public expenditure, but to adopt a policy that is neutral with regard to the business cycle. Such a policy looks through the business cycle and allows the operation of what are known as automatic stabilisers. For example, in a recession, because welfare spending tends to increase Government spending all other things being equal, thiswill naturally tend to rise, whereas revenues will tend to fall. Hence, a deficit is likely to arise.
Mr. Jimmy Wray (Glasgow, Provan) : Will the hon. Gentleman tell us where all this theoretical philosophy comes in, and what it does, for people in Scotland and the rest of Britain? Does he realise that 10 million people are living in poverty now, 2.5 million of them children? What are we to tell people who lose their homes, whose homes are repossessed--there are now 24,000 of them in Scotland and England? What are we to tell the 25,000 small business people who lose their businesses? When the Government took power in 1979, there were 344 small business insolvencies in Scotland. The latest available figure, for 1990, is 4,756. No doubt the figure for 1991 will break all records. How are we to explain to all those people, and to the 70,000 people on waiting lists--
Madam Deputy Speaker : Order. This is an intervention, not a speech. The hon. Member for Stamford and Spalding (Mr. Davies) must be allowed to make his speech in his own way.
Mr. Davies : The hon. Gentleman has asked me a series of questions, but they all have the same answer, so it is easy to deal with his intervention. There is not and never will be a final solution that will obliterate all human poverty and disappointment, but there is a great difference between sound and unsound economic management. Unsound economic management will engender far more human unhappiness than sound economic management. If the hon. Gentleman neglects some of the principles of sound economic management--I fear that, if the Labour party in its present state of mind ever came to power, that is what it would do--the problems to which he has drawn attention would be exacerbated.
The Government have been on the right lines in adopting what I call a neutral policy and allowing the operation of the automatic stabilisers which inevitably mean that we tend to move into fiscal deficit in a recession and to run a surplus in a boom. That has happened over the past few years.
I have set out three intellectually and historically respectable approaches to the management of current expenditure. But there is a fourth approach-- spend, spend, spend, regardless of the state of the trade cycle and of the effect on the economy. This approach involves going on spending until one runs up against the final obstacle and exhausts either the ability to tax or the ability to borrow. That policy has been practised in many parts of the world--notably in Latin America, generally with disastrous consequences, to which I should like to draw
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the attention of the hon. Member for Glasgow, Provan (Mr. Wray). Countries that were prosperous before the war, such as Peru, Uruguay and Argentina, have been ruined by this policy.In this country, there is a well-founded suspicion about the Labour party. When it was in power in the 1970s, it too adopted the policy, and went on spending until it ran out of borrowing power. That is why the International Monetary Fund had to come here in 1976, like a team of official receivers entering a bankrupt company. That is exactly what it was. There is considerable and justified disquiet about the Labour party, and it existed before the great confusion engendered by its statements in the past two weeks.
Mr. George J. Buckley (Hemsworth) : The hon. Gentleman used the phrase "spend, spend, spend". The Chief Secretary said that the Government have greatly increased public expenditure. Does that show that Government policy is to spend, spend, spend? The hon. Gentleman spoke about good and bad economic administration. Would he say that the Japanese and German economies are badly run? Those countries each have a good balance of payments, while ours is excessive and rising.
Mr. Davies : Japan has a healthy fiscal surplus, and to that extent we have the same fiscal stance as the Japanese. The German economy is coming out of surplus because its fiscal and balance of payments surpluses are disappearing. However, that is a separate matter and it is not germane to my argument.
It is plain that the hon. Member for Derby, South (Mrs. Beckett) does not subscribe to any of the first three classic approaches to public expenditure management that I have outlined. Twice, she specifically protested that the Government had run a surplus during the boom years of 1988 and 1989. Running a surplus would have been a natural consequence of the Keynesian approach or the neutral approach of which I spoke. Is the hon. Lady's approach the fourth approach--it is certainly not a balanced Budget--or is it a new model, a new solution, to the problems that have fascinated those who are responsible for public finance for at least 150 years?
In the past week, I have begun to suspect that Labour has invented a new fifth model, which I shall call the theory of random numbers. An Opposition Member thinks of a number during a television interview, and one of his colleagues thinks of another number the next day in the House. A third colleague will then try to clear up the mess by coming up with another number in a television interview a day or two later. That is Labour's contribution to the vital matter of public expenditure policy. The figure of £20 billion has simply been thrown out, and the hon. Member for Derby, South signally failed to justify it or to relate the figure in any way to Britain's capacity to finance it.
The British people will not hand over Britain's economic management to a party which obviously cannot decide between competing objectives and cannot establish clear priorities, which cannot weigh up the consequences of its proposed actions and will not state simply and clearly its concept of public expenditure within economic management. Labour no longer knows what it is saying or doing.
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8.3 pmMr. Bruce George (Walsall, South) : The speech by the hon. Member for Stamford and Spalding (Mr. Davies) was in two parts. The first part was a serious academic analysis and I tried hard to follow his argument. The second part degenerated into political knockabout. That was because, in the last period of this Government, he seeks to get himself elevated.
The hon. Gentleman castigated the Labour party as some sort of replica banana republic, using phrases such as "spend, spend, spend". He should look at the serious work being carried on in the Labour party. I could take the criticisms more seriously if his party, which has had well over a decade in Government, had bequeathed to society an efficient economy flowing with goods and respected abroad. It would help if unemployment were diminishing, and we had healthy public services and a healthy private sector. The fantasy propounded by Conservatives does not in any way accord with the facts of our economy and industry.
One would hardly think from what we have heard that growth has been unspectacular and that we have had two, perhaps three, recessions. In my constituency, unemployment is double the rate that it was when the Government came to office in 1979. I represent a constituency in the midlands which has historically been in the forefront of manufacturing. Britain has lost 2 million manufacturing jobs, and many of those were in the industrial west midlands. In view of the way that the economy has plummeted, lectures by Conservative Members are most unfair.
Parliamentarians deal in a disgraceful way with issues such as this. We read in the text books about parliamentary control of this and that, but we have abysmally abdicated our responsibilities for controlling public expenditure. Despite reform of the Select Committee system, the National Audit Office and parliamentary procedures, in terms of controlling the Executive, this is probably the weakest legislature in the democratic world.
There is growing legislative power in eastern Europe, and the countries there are well ahead of us in controlling their Executives. I have been to conferences on parliamentary control and it is with acute embarrassment that I tell parliamentarians from other countries how supine we are in dealing with the Executive and how seldom we vote on serious issues like this. This matter is of all-party interest and we ought to get to grips with control of expenditure. I am a member of the Select Committee on Defence, which is one of the better Select Committees, but the way in which we seek to deal with defence expenditure is lamentable.
Mr. Peter L. Pike (Burnley) : Is my hon. Friend worried that the increasing amount of legislation in the last few years has given great powers to Secretaries of State to take action without reference to the House? That increases the tendency of which my hon. Friend speaks.
Mr. George : I entirely agree. I have criticised the Government, but much of my criticism could be levelled at hon. Members. If we got together on an all-party basis and took a more serious interest in the minutiae of estimates and expenditure, we would be able to do a much better job. Select Committee dealing with expenditure are no more than amiable seminars.
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Dr. Godman : My hon. Friend speaks about the weakness of Parliament. Does he agree that the continuing weakness of this place is made worse by the growing power of political decision makers in Brussels and Strasbourg?
Mr. George : I partly agree with my hon. Friend. Even if we were able to extricate ourselves from Europe we would not be able to control our Executive in the sphere of public expenditure. I welcome the way in which the expenditure plans are now being published--it is a great step forward-- but that in no way increases our control. Public expenditure reflects differences in political philosophy. I was in Parliament during the 1970s. It was not an idyllic period to hold office. The Labour Government had no majority and we were in the middle of the oil shocks. It was exceedingly difficult to manage the economy in those difficult years, but lessons have been learnt. Any Government who offered limitless expenditure to improve services left, right and centre in a pre-election period would rightly be diminished in the eyes of the electorate. Any party aspiring to office must act in a responsible manner in opposition if it is to be taken seriously. Despite the criticisms that I have heard from Conservative Members, the Opposition are being realistic and are not seeking to enter into an auction with the Government. We are seeking realistically to present to the electorate the way in which we shall seek to manage the economy in the future.
The effect of Government policies in my constituency is unemployment at 10 per cent. and rising. Unemployment in the west midlands rose last month by 12,000 to 7.7 per cent. I regret that we may be returning to the situation that existed in the early 1980s, when, almost every time the telephone rang in the hon. Member's office, it was feared that it would be a personnel manager or a trade union representative telephoning to say that there were to be major redundancies or a factory closure. There has been a vast increase in the number of bankruptcies. I want to see the small business sector survive, but the small entrepreneur, allegedly well represented by Conservative Members, is going through a difficult period and suffering greatly.
Training is surely the key to our future economy. A few weeks ago, I visited an excellent training scheme run by the National Association for the Care and Resettlement of Offenders which was being closed by the local training and enterprise council because money was tight. The scheme was worth preserving and I spoke to management and trainees who were very upset that it was about to bite the dust. Thankfully, the people who were losing their places in that scheme were to be absorbed elsewhere.
From the press today, I see that the Government are considering stepping up the number of jobs deliberately created in order to mop up more of the unemployed in this pre-election period. The Government have closed schemes, in some places irrevocably, but perhaps in the next few months new schemes will emerge as the Government, in their electoral panic, seek to create jobs.
I want to dwell on one area which shows the difference in philosophy between the Government and the Opposition, and that is the sphere of police manpower and expenditure. A report by the National Audit Office on promoting value for money in provincial police forces says :
"Spending on the police has risen by nearly 50 per cent. in real terms from 1979-80 to the present."
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